Where have my customers gone? Beyond NCOALink
Customer acquisition is a costly endeavor. Success is measured by the lifetime value of a customer, and marketers today have developed many loyalty programs to keep customers engaged to enhance their lifetime value.
Most marketers use NCOALink on a regular basis to keep their customer file up to date - or so they think. What most marketers never consider is going beyond NCOALink. Market studies conducted by industry experts suggest that as many as 35 percent of the U.S. population does not report its change of address to the U.S. Postal Service when they move.
What does that mean to the marketer who uses NCOALink only for address updating? Potentially, 35 percent of your customers' address changes will not be updated through the NCOALink process. That's a staggering number, especially when you consider that an average of 17 percent of the U.S. population moves annually. With today's high postage cost for First Class mail, the majority of marketers use Standard mail and thus aren't aware that their clients are no longer at their old addresses. The marketer, therefore, incurs the high cost of mailing to those customers whom NCOALink couldn't correct. This situation is then compounded by the loss of revenue from the sales that cannot be made to these customers.
What can be done? A few of the national compilers of consumer data have developed a Proprietary Change of Address (PCOA) product to be used with NCOALink. Many marketers can recapture an additional 5 to 15 percent of those lost customer addresses by using PCOA to update their customer bases.
Depending on the industry, customer acquisition can cost between $50 and $5,000, or more. When you factor in the lifetime value of a customer or a donor, the cost of losing touch with them can be staggering. Considering PCOA's relatively low cost, its use is something that every direct marketer needs to consider. In most cases, the associated investment can be recovered in just one mailing.
Marketers also seem to overlook other hygiene necessities, mainly as a result of not really understanding the value, the processes and the ROI of correct hygiene in customer-acquisition or loyalty programs.
Again, let's use the assumption that the marketer is mailing Standard mail. Two areas that are commonly overlooked are Deceased Suppression and DSF2/DPV processing.
The U.S. Census estimates that 2.5 million people will die this year in the U.S. If you were to mail to the deceased, you would get no response, and you might do more harm than good even if the mail gets to the household. Depending on the age of your customer/donor base, the annual percentage of deaths could be far above the 1 percent of the U.S. population that dies annually.
Another great misunderstanding is in assuming that if the file has been ZIP + 4-appended or CASS-processed, valid delivery points are ensured. The truth is that there are no such assurances, even though you qualified for, and received, the automation discount.
ZIP + 4 is based on street address ranges. For example, if Main Street ranges from 100 to 1000, the process will append a "plus 4" for "813 Main Street," even though it does not actually exist. However, "83 Main Street" cannot be coded because it falls out of the range.
Another example is an apartment dweller who lives at "100 Main Street, Apartment Number 10B," but the apartment number is missing. "100 Main Street" does exist and is ZIP + 4 coded for automation purposes. As it happens, there are 300 apartments in that complex, so your mail ends up as "dead letter" mail as a result of the missing apartment number, and you get no response.
DSF2 or DPV processing will identify invalid delivery points and missing apartment numbers, allowing you to drop these records prior to mailing. It's not uncommon to see over 15 percent of a file missing an apartment number, having an incorrect apartment number or an invalid street address.
Keeping in contact with your customer base for an extended period of time through the use of proper tools, products and services helps you reduce costs and improve both ROI and lifetime value.
One out of seven Americans moves each year, according to the U.S. Census Bureau. That translates into over 20 million households this year alone. These households spend more than $150 billion annually on move-related products and services, which is just the tip of the iceberg. The rest is the change in the psychographic characteristics of new movers (their spending behavior). These new movers are literally "up for grabs."
Traditional list thinking has to be adjusted when considering new-mover marketing (or any other life-event psychographic) in your promotional program strategies. Though a demographic characteristic may distinguish the best candidates for your product or service on the basis of capacity and capability, a psychographic characteristic distinguishes them on the basis of inclination or need.
Almost 80 percent of new movers plan to make appliance or electronics purchases. More than half plan to make furniture purchases or window-treatment purchases or select auto repair, hairstyling, dental, medical, insurance, veterinarian, banking, bath, department store, dry cleaner, garden, hardware, building supplies, paint/wallpaper, pharmacy, supermarket and video services within a few months.
The list goes on and on for new movers. This is truly a prolific purchaser group. It's not prolific because of their ability to buy or their propensity of being persuaded, but because of the changes they are going through. Response rates of 5 to 10 percent, and even 15 percent, are possible within this segment, and this group will provide better substitution for what had been lost in the routine cycle of customer attrition.
Although there may be fewer new-mover names available on a monthly basis relative to other audiences, the ROI success of a long-term commitment to this audience can often be seen as a marketing triumph. Why? Unlike traditional lists, psychographic lists are not static; in fact, they're perpetually refreshed. There is no hotline segment, because it is all hotline by definition. A perpetual hotline list can be rolled out by way of a continual mail program. Whether you're looking to build traffic or make specific sales, the way to reap the benefits of a psychographic list is to mail continuously and measure performance over 12 months. Compare this result to your traditional program and you should find a considerable advantage to the new mover segment.
The program should also produce preferred customers, since their spending patterns will outpace those of your non-move customers. (Similar advantages can be gained from other lifestyle change lists, such as newlyweds or new mothers.)
There is the potential for some downside, though. Not all new mover lists are created equally when it comes to accuracy and recency. Combine that with the increasing tendency toward identity protection and privacy and the use of a somewhat inaccurate mover list, and you can crank up the complaint noise level considerably, especially when you are overtly welcoming non-movers into their "new homes."
Choose your list wisely. Look for a list with a multi-source structure, which has been passed through a rigorous hygiene and deliverability process. This will help to optimize accuracy and recency and, ultimately, your results. Design a package that takes advantage of the one-to-one nature of marketing to a new mover, plan your mailings in a perpetual schedule, analyze your results over time and you will see a minor achievement become a major triumph.